Political crises, under-developed communications and electricity, as well as a lack of a proven technology ecosystem make raising funds for tech startups in Africa a real challenge.

Some traditional European and American investors into African startups prefer to give grants within the framework of aid, but experts in the field say only private equity financing, and the financial and product rigors that accompany such investments, can create a sustainable tech industry in Africa.

Maurizio Caio, co-founder and managing partner of TLCom Capital, a venture capital firm raising money for investments in African startups, says there is around $50 million in private equity VC money currently looking at Africa tech investment.

“There is a lot of money with a lot of competence looking at areas like mobile payments and mobile-enabled energy, but with the view of saying ‘let’s support the development of Africa by helping these entrepreneurs to deliver,” Mr. Caio says in an interview.

“By providing grants and celebrating companies that are not good enough just because it is important to support Africa, traditional investors are not creating memorable companies and entrepreneurs that can have global status,” he says.

To create billion dollar tech companies in Africa and bring them to IPO on the NASDAQ, investors “must give them the Menlo Park Sandhill Road treatment,” which, according to Mr. Caio, means telling some entrepreneurs that they’re not good enough, and realizing that a majority of companies being invested in will fail.

“What’s needed is equity capital at the service of the entrepreneur, who is the hero. We need to build a number of success stories. It takes time. And you need to be nasty,” he says.

Mr. Caio says there is a lot of social and impact investments in technology in Africa, which is important in itself, but that with grants, there is a risk of a disservice by financing and celebrating people and companies that are not good enough. “What is not practiced enough is to say to the entrepreneur: unfortunately your company must die because you’re not good enough,” he says.

TLCom Capital says it’s close to reaching its target of raising a $50 million fund for investing in technology startups in Africa. If that goes well, they plan to raise another $50 million.

But it’s not been plain sailing.

The firm, with offices in London and Nairobi, is working in a field with only a handful of other tech venture capital players.

TLCom investment director, Ido Sum, says some potential investors think the firm’s TMT (telecom, media and technology) remit is too risky, and are weary of committing money to an unproven sector. “Investors ask us to show them examples of exits. Examples of exits in an industry that is four years old on a good day is hard because the time to maturity of these types of companies is 7 to 10 years, everywhere, globally,” he says.

Even though technology hubs are sprouting across sub-Saharan Africa, and the World Bank says there are now some 90 tech hubs across the continent, Venture capital is still seen as a poor asset class for backers, Mr. Sum says. “Funds of funds and large institutional investors find investing in tech in Africa too risky. If they even consider looking at Africa they would rather do a third buyout fund than take a small bet on previous rounds. Some of them can’t invest less than $30 million in a fund, and some of them don’t even know where Africa is. Technology is perceived as additional risk on top of the Africa risk,” he says.

At one funding consultation, Mr. Caio recalls, a potential investors advised him to pick either Africa, or technology, as together the combination was too much of a red flag for investors.

But for Mr. Caio, in terms of entrepreneurial brilliance, Africa is a global leader in mobile payments and mobile enabled functions, with Kenya, for example, having the largest amount of mobile payments transactions in the world.

“For big data, you go to Silicon Valley,” he says. “But for mobile payments, quite frankly, you go to Nairobi.”

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